Mortgage Rates Pushing Higher

As you know, markets recently have increased views that finally after years of little inflation that there will be a sea change coming.  January Consumer Price Index fueled that increase as the strong reading is putting upward pressure on mortgage rates this morning. With rates continuing to move higher, we believe the best option for many borrowers is to lock in a rate soon on a purchase or refinance.

Where Are Mortgage Rates Going?                     

>>> Rates are pushing higher

We got arguably the most significant economic report of the week out this morning with the Consumer Price Index reading for January. Analysts had called for a monthly rise of 0.3%, but the actual reading came in slightly above that at 0.5%.

With one of the leading theories for last Monday’s stock market turbulence being an uptick in inflation reflected in the rise in average hourly earnings, there was a lot of anticipation that a rise in inflation in today’s report could have a similar effect.

Looking at the market today, the markets were swift with their reaction as stocks did fall immediately after the release of CPI but have since moved back up to above where they started the day. Long-term Treasury yields also had an immediate reaction to the CPI reading, jumping up by several basis points.

The yield on the 10-year Treasury note (the best market indicator of where mortgage rates are going) is now up to 2.87%. That’s very close to the week’s high of 2.89% hit during early trading on Monday.

No doubt retail sales were much weaker in December (Holiday shopping) and weaker in January than thought. Bond markets however are more directly focused on CPI rather than the lack of consumer spending. The argument offered up is that January retail sales are usually subject and generally subject to revisions. Markets choose what to focus on and today the soft consumer spending reflected in retail sales in December and January are being pushed away with all attention on the increased CPI inflation data. The stock market though is pressured by both CPI and retail sales.

The implication here for financial market participants is that the Federal Reserve might be moving more towards four rate hikes in 2018 than the three rate hikes that have been expected.

Rate/Float Recommendation           

>>> Lock now to avoid risk of rising rates

Long-term Treasury yields have moved back up near multi-year highs, putting upward pressure on mortgage rates. With rates continuing to move higher as the year progresses, it only makes sense to lock in a rate sooner rather than later.